Earnings Explosion Provokes EXACT Sciences Corporation (EXAS) Options Traders

EXACT Sciences Corporation (EXAS) is poised for its best percentage gain in seven years

by Alex Eppstein

Published on Jul 26, 2016 at 3:07 PM
Updated on Jul 26, 2016 at 3:09 PM

We've covered a lot of earnings winners today, but none quite like EXACT Sciences Corporation (NASDAQ:EXAS). The diagnostics stock is positively exploding after a smaller-than-expected quarterly loss, up 28.4% at $16 -- its best single-day performance in seven years. Not surprisingly, EXAS stock and options volume are also booming.

Specifically, EXAS stock volume registers in the 99th annual percentile, while its options are trading at five times the expected intraday rate -- and could hit an annual high by day's end. So far, nearly 20,000 contracts have been exchanged.

In terms of specific strikes, the now in-the-money August 14 call is most active. From the looks of it, this option is seeing some sell-to-close activity, as bullish bettors presumably lock in paper profits ahead of front-month expiration, at the close on Friday, Aug. 19. Meanwhile, long-term bulls are betting on even more upside, buying to open the January 2018 25-strike call. In other words, these options players foresee EXAS toppling $25 -- territory not charted in over a year -- by January 2018 expiration.

Historically speaking, call buying is par for the course. EXAS sports a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 6.97, with nearly seven calls bought to open for each put in the last two weeks. Suffice it to say, these option bulls are sitting pretty right now.

Conversely, there are plenty of EXACT Sciences Corporation (NASDAQ:EXAS) short sellers feeling the pain -- in particular, those who didn't purchase calls as insurance. Short interest surged 50.5% during the most recent reporting period, and makes up roughly one-third of the stock's float. As these bears are forced to the exits, EXAS' upside momentum could pick up even more speed.

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